The United States’ crackdown on cryptocurrencies and companies will only serve to stifle crypto-related innovation and “weaken” the country, said an industry expert in the wake of Coinbase’s recent Wells news.
On March 22, crypto exchange Coinbase became the latest crypto company to receive “legal threats” – in the form of a Wells notice, just a month after stablecoin-issuer Paxos received its own in February. Some suggest that there are more to come.
Mati Greenspan, chief of crypto research firm Quantum Economics said he believes US regulators have been unfriendly to crypto “from the beginning.”
The recent collapse of crypto and startup-friendly banks, including Silvergate, Silicon Valley Bank (SVB) and Signature Bank has been seen by some as part of a scheme by regulators to un-bank the crypto sector, called “Operation Choke Point 2.0.”
Meanwhile, the March 20 economic report from the White House became a scathing review of the benefits of crypto assets, spending almost everything on debunking the “so-called” benefits.
Greenspan told Cointelegraph that the rumored action is possible because crypto is seen as a “threat” to the dominance of the US dollar in global trade – a major and long-term benefit for the US
Russia, China, and now crypto. Slowly but surely the United States is isolating itself from the global economy. The USD cannot remain the world’s reserve currency much longer under these circumstances.
— Mati Greenspan (@MatiGreenspan) March 14, 2023
However, as more people start using crypto for cross-border remittances around the world, he warned that the crackdown on crypto in the US could have the opposite effect on the dollar:
“The removal of cryptocurrencies from the US banking system will only isolate the United States and weaken the dollar’s position as the global reserve currency.”
Adrian Przelozny, CEO of the crypto exchange Independent Reserve told Cointelegraph that the recent problems of the banking sector are not due to “crypto failures” but caused by banks managing risks in an “irresponsible way.”
“The White House would do a better job of scrutinizing practices in the banking industry,” he said.
Speaking about the latest action against Coinbase, Przelozny said the “hostile environment for the crypto industry” in the US will push “future jobs, investment and innovation” offshore.
“Singapore, Hong Kong and Australia potential” that eyeing the benefits of the industry can prove a better home for it and countries that “will reap the economic benefits,” Przelozny said.
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The exact reason regulators are targeting Coinbase is still unclear. The SEC declined to comment on the matter.
Investing in crypto asset securities can be highly volatile & speculative, and platforms where investors buy, sell, borrow/lend these securities may not have important protections for investors.
@SEC_Investor_Ed for investors: be careful with crypto asset securities.– US Securities and Exchange Commission (@SECGov) March 23, 2023
Michael Bacina, lawyer and partner at Piper Alderman agreed that the “regulation by enforcement model” will “drive crypto-asset innovation offshore,” and added:
“This is an odd position to adopt given the losses we have faced over the past 12 months due to collapses related to unregulated offshore structures.”
Bacina said for years the industry has been asking for clarity on how to comply. He pointed to recent “telling” comments made by a judge in Voyager Digital’s bankruptcy case that “observed that there was no clear guidance from the regulator.”
He added that until the government sets a path for regulatory compliance, offshore jurisdictions will continue to house crypto companies “which will cost projects and increase risks for consumers and investors.”
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